Thursday, December 31, 2009

$9.8M: Biscuit Run Sold to Virginia For 78% Less Than 2005 Price...But Story's Not Over

*Updated at bottom

The PR rep for Hunter Craig and Forest Lodge LLC stated,  “the investors will not come out whole and no one is getting a windfall,” after the announcement that the Commonwealth paid $9.8M for the property for which Forest Lodge LLC paid $46.2M in 2005, $36.4M or 78+% less.

However, the issue of tax credits, which may be sold, remains to be determined in the future.  From the DP:

“This is what is known legally as a ‘bargain sale,’ when there is a reduced cash payment and the seller applies for tax credits,” said Bryant in an interview. “We have determined that this project is eligible for land preservation tax credits. The seller will have to apply in the 2010 calendar year and it will be up to the state Department of Taxation to act on their application.”

 The story's not over: 
1. The information about tax credits will not be available to the public.
2. The State, and the County, both of which are suffering from massive deficits, will now have to find $ in their respective budgets (and/or donors) for infrastructure improvements to get folks in and out of that park, among other expenses. 
3.   How does 2015 sound for a park opening?  Conservative estimate, or not enough time?

 Read more by Brian Wheeler of Charlottesville Tomorrow here.  

Previous posts on Biscuit run here and here.

January 1 Update: 

Courteney Stuart at The Hook reports that the loan for the property was already delinquent to Bluefield, WV's First Community Bank, and selling to the Commonwealth is technically a "short sale."  Additionally, "Some details of the loan settlement between Forest Lodge and First Community Bank may be revealed in a January filing by the publicly held bank holding company..."   Read all here. 

RealCentralVA has additional coverage as well.

Tuesday, December 29, 2009

The Federal Government Acknowledges Housing Crisis is Deepening, Throws $$$$$$ At Fan & Fred

This blog detailed the condition of the national housing crisis in a recent postAnd then on Christmas Eve, with no Congressional oversight, everything changed.

Santa Claus made an unannounced stop at Treasury, and naughty Tim Geithner was apparently so happy to see him that he wrote Fannie Mae and Freddie Mac BLANK CHECKS.  These entities currently own or back the majority of US mortgages, and are  bleeding cash and facing further losses. 

The "bad" news?  This is the federal government's acknowledgment of how deep and wide the housing crisis still is: expect the economy and housing to get worse before they get better.  

The "good" news?  This is the BAILOUT FOR THE AVERAGE JOE, more than a year after the Wall Street "Too Big To Fail" banks got theirs. 

Estimated cost:   $1,000,000,000,000.00Over a Trillion $.  Taypayers' money, natch. 

Here's the vital reading: 

WSJ: US Takes Cap Off Fan & Fred Bailout (with nearly 200 comments)
Calculated Risk: Update on How Government is Supporting Housing - Lists Programs 
Fannie and Freddie's Home Inequity
Dean Baker: Fannie and Freddie: Just a 4-Letter Word 
Analysts Say F&F Will Buy Delinquent Mortgages Out of the Securities They Hold 
Fannie's Mortgage Holdings lost 26% of value in November

RealCentralVA post on the issues here.  Don't miss the brief overview on the local market.

Monday, December 28, 2009

Biscuit Run: Here's How A Wealthy Developer May Profit Off A Failed Vision While Albemarle County Continues Its Fiscal Freefall

The details, sketchy as they all are, indicate Hunter Craig's business acumen and his lawyers' knowledge of the property and tax codes; they also let us all understand exactly that those in decision-making capacities for Albemarle County development needed much more information, knowledge, and realism than what they had. (Thousands of additional housing units were necessary in Southern Albemarle County?  Really?  Where were the jobs going to come from to support those new homeowners?)  Read.

Wednesday, December 23, 2009

2009 Housing Market At Year's End: Massive Problems and Hard to Clean Up, Like the C'ville "Snowpocalypse"

The thing about being snowbound from an historic storm--see slideshows here and here--is that it gives time to catch up on recent national news in housing and the economy.  And while it's beautiful outside, the City and surrounding Counties have had terrible times getting things back to normal--six days out, and there's still lots of chaos.  Lack of tools and catastrophe planning.

Which, when you think about it, sounds a lot like what's going on out there in the broader economy: a terrible storm has come through America, and the response of the Fed, Treasury, and the Obama Administration has been awfully slow, ineffective, and incredibly expensive.

The following stories will  have legs far into 2010:

One in Four Homeowners is Underwater.
Owing more than the property is worth.  Usually can't refi, takes a loss if selling, no Home Equity Line of Credit.  Inhibits job mobility and consumer spending, the latter of which is 70% of GDP.  And the Underwaters are only going to grow.   What's your neighborhood likeRead.

The "Shadow Inventory" rose 55% from one year earlier.
Nationwide.  Rising unemployment, falling housing values, consumer credit lines vanishing.  And the "shadow inventory" is only going up.   Read. 

The Obama Mortgage Modification program: Fail.
The $75 Billion program was supposed to help 3-4 million mortgage debtors.  By Q3, about 700,000 mortgage holders had been enrolled but just over 31,000 permanent mods had been made.  You saw that correctly--31,000.  This is "extend and pretend" in all its glory.  Read. 

Here's why the Charlottesville Area will have more foreclosures and short sales.
Mark Hanson explains why foreclosures will and everywhere else in the US.  Up to 20 million more foreclosures.  Hanson looks at the numbers and explains why a 50% DTI mortgage is untenable, how loony notions of "affordability" are now out the window...looks at HAMP and the "culture of fraud" at Fannie and Freddie.  (Based on Hanson's data, plus the two previous can see how it's going to become more socially and culturally acceptable to strategically default in 2010.)   Read. 

Speaking of fraud, your hardworking taxpayer dollars are being used to prop up Fannie, Freddie, AIG, GMAC. 
All the mortgage biggies are socialized.  Read.

Speaking of mortgages, Ben Bernanke recently re-fi'd at 5%.
Meaning he thinks a 5% fixed rate is a good deal...and rates are going up from here. Read. 

And here's what's waiting to kill the consumer...and the economy.
"The inflation bomb waiting on the Fed's balance sheet" the form of Mortgage Backed Securities.  The Fed plans to stop buying MBS at the end of March...and then what?  Not only will mortgage rates go up, but the handling of these is like a giant basket full of rattlers...unpredictable as to what investors will do.  Read. 

Existing home sales were up in November 2009...but that's the end of "good" news in housing for a long time....
....according to Calculated Risk.  Blame (or cheer) the tax credit...and then get back to the reality that existing home sales don't do much for the wider economy except give some real estate agents some fees and perhaps a few textiles and furniture sales.  Read. 

If you're still enjoying your morning coffee or evening scotch, DO NOT READ this next bit. 
Edward Harrison from Credit Writedowns via TBP:  "The Recession is Over But the Depression Has Just Begun."  Harrison makes you want to hoard cash, guns, and become a microfarmer.  He details the WwWwww shape of the Fake Recovery and clearly defines where the US may be headed in the next four years.  Hold tight. 

Just in case you didn't see this #1 most emailed Op-Ed, Tiger Woods: Person of the Year
The most famous golfer adulterer in the world as emblematic for everything wrong with America.  Read.

What'd we miss?

Coming soon: the C'ville Bubble Blog's "predictions" for 2010.  Whee.

Title refined after original post.

Friday, December 18, 2009

Weekend Before X-MAS...White Out!

Check out The Hook's webcam on the Downtown Mall.
Looks inviting.  However, Governor Kaine warns: People should "...prepare to be on their own for up to 72 hours."  He declared a State of Emergency.  Here's the current predictions for snow, with image via WaPo:


Wednesday, December 9, 2009

Biscuit Run Development Will Never Be Built

From The Department of Coming to Grips With the "New Normal": Charlottesville Tomorrow and The DP have the story. 

The gigantic land parcel, 1,200 acres, in Southern Albemarle, proposed with up to 3,100 homes, will instead most likely be donated as land for a state park.  Details forthcoming.

The Breeden Family made $46.2 Million selling the parcel in 2005 to Hunter Craig.  This was at the peak of the bubble--the smartest real estate transaction ever completed in this area, and one which allowed other land and home sellers to maintain champagne dreams for years.

Also at risk for never being completed, however, is the Southwood Development, 350 homesites for Habitat for Humanity, which relied upon Biscuit Run's infrastructure improvements and funding.

Biscuit Run generated $325,000 annually in property taxes for the County, which is already suffering, and will be for years to come, from a budget deficit created in large part by declining property values.

Related Reading:
The Coal Tower Project to Remain a Dream, Too
Belvedere Stalled in Buildout (see comments),  Has Bad $ News 
Albemarle County Returning to Life Before the Bubble

Monday, December 7, 2009

Glenmore's Michael Comer Appears Before Grand Jury - Now Seeking Plea Bargain

Accused Glenmore embezzler Michael Comer appeared in Albemarle County Circuit Court today before a Grand Jury.  His attorney told the judge that he hopes to make a plea agreement, rather than face conviction for five felony counts of embezzlement; each carries a maximum of 20 years in prison. 

The updated case status appears below.  The result of today's hearing is entered as "True Bill," which is a decision from the Grand Jury, in writing, that it has heard enough evidence about an accused person that a crime was probably commited.

The next court date is January 28--but the type of hearing has yet to be determined.  

Click for larger image in new window.

Sunday, December 6, 2009

The Case To Date: Michael Comer Embezzlement Scandal

Scroll down for synopses and complete list of posts on the Michael Comer / Glenmore Scandal.
Update 7: April 13: Comer to appear in court, said to plead guilty. 
Update 6: April 9: Comer's Brother-in-Law's RE Agency Teams Up With BHG
UPDATE 5: April 7: Comer Relists Investment Property For Sale At 35% Below Orig Asking
UDATE 4: February 4: Comer Residence Sells For 32% Less Than Original Asking Price
UPDATE 3: February 1: Part I of Glenmore Scandal Ending; Comer Set to Plead Guilty April 13  
UPDATE 2: January 20: Another Comer / Kessler property goes up for sale. 
UPDATE 1: December 7 court appearance, click here. 

It's a real estate saga that reads like the beginnings of a Grisham novel--except that things never turned as spectacular or as dark.  Instead, it has the elements of student fiction: the nouveau-riche, a husband who was never gainfully employed outside the family, a wife who was almost a champion athlete, the constant pressures of needing more and keeping up with appearances in a planned community squatting in the middle of Albemarle County's oldest farms/estates and established families...and a successful brother-in-law floating cash over the mess.  Yes, the Michael Comer embezzlement scandal has kept folks talking for months now....

To recap:
Glenmore's ex-Treasurer, ex-Country Club President, the Accused Michael Comer, will face a Grand Jury at Albemarle County Circuit Court, Criminal Division, for Indictment on  Five Charges of Alleged Embezzlement Monday, December 7.   

Comer disappeared at the beginning of July and days later it was announced that $666+k was also missing, apparently embezzled.  Michael Comer worked for Glenmore Associates, the Developer of the Glenmore Community.  His brother-in-law, Jeff Gaffney, headed up the company, and is also CEO of Real Estate III.  Gaffney's wife is the sister of Comer's wife, Kandi Kessler, who was Golf Pro at Glenmore; their father was the original mastermind at the community.

The following posts appeared on this blog as events unfolded.  The posts include some analysis and commentary; the posts also link to other sources in the MSM.  The first set of posts is about Michael Comer; the second set of posts is about his properties, all of which went up for sale after he disappeared.  In chronological order, from most recent back to July.

Michael Comer and the Elements of Embezzlement  
Did he or didn't he?  These are the basic, common law elements of embezzlement. Read

Glenmore Associates Reaches Out-of-Court Settlement to Pay Back Michael Comer's Alleged Embezzlement  
Giving the homeowner's association some cash and deeds to promise payment - That was fast.  But where's Glenmore Associates own forensic audit? Read

Glenmore's Michael Comer Plans to Fight Embezzlement Charges

Why not?  Claiming ignorance often goes a long way. Read

Glenmore's Michael Comer: The Unanswered Questions 
Did Comer's extended family know anything?  Where did Glenmore Associates, the Developer, think all that cash was from?  Who knew anything and when did they know it?  etc. Read

TUESDAY, JULY 28, 2009
Glenmore's Michael Comer Now on "Staycation" in His Home, After a Month in the "Unknown"
Details on where Michael Comer hid for nearly a month have never been released. Read

FRIDAY, JULY 24, 2009
Glenmore, After Michael Comer: A New Era of Competence and Transparency?
An awful lot of angry homeowners not only want competence and transparency, they want money and Comer's head on a platter.  Links to the audit report. Read

Wife of Missing Glenmore Treasurer Michael Comer Issues Partial Statement
What Kandi Kessler Comer said and, importantly, what she did not say. Read

TUESDAY, JULY 21, 2009
Michael Comer Update: Glenmore Community Association Announces $666K Missing Along With Ex-Treasurer  It took nearly three weeks, but finally what the County was buzzing about became announced as a reality.  Read

Missing Glenmore Development Associate Michael Comer - Update  The search was called off, and other "possibilities" were being considered.  Read

MONDAY, JULY 6, 2009
Michael Comer, Glenmore Country Club Prez and Developer, Still Missing  Read 


Shortly after Michael Comer's disappearance, his primary residence, resort retreat, and an investment property went on the market.  Which made one wonder--how were these sales going to close if Comer wasn't available to sign any contracts? 

The property listings on the internet: 
2930 Milton Village Lane

54 Firtree Drive

3808 Richmond Road - Price was reduced to $325K, but now increased to $429K with a 6 acre lot

THURSDAY, SEPTEMBER 17 Glenmore's Michael Comer: Price Reduced Again on Primary Residence, Now Asking Less Than What Was Paid  Read

Glenmore's Michael Comer's Asking Price for Primary Residence Reduced By $173K Read

Michael Comer Update: Prices Reduced on Wintergreen and Albemarle County Houses Listed For Sale Read

Michael Comer's Home in Wintergreen For Sale Read

FRIDAY, JULY 24, 2009
Missing Glenmore Treasurer Michael Comer's Home For Sale Read

Thursday, December 3, 2009

195 Georgetown Road: "1960 Called and They Want Their House Back!"

The quote is from the listing.  Also: "Bring your remodeling idea book...." The house, on 3.84 acres between Hydraulic and Barracks, was last purchased for $200K in 1994.   Assessed: $337.9K.

 2009 is calling to say that sales in this price range are down YOY 33%, and many of those sold properties didn't need full remodels.

 Click for larger image in new window.

Above image copyright CAAR.
From Albemarle County Records:

Albemarle County Affirms Plan to Raise Property Taxes, Stop All Infrastructure Improvements for 5 Years, Deny Teachers Pay Raises

...from Wednesday's Board of Supes meeting.  The plan provides direction for financtial planning but is  "not binding."  On Property taxes:

The five-year plan also calls for a 77.2-cent real-estate tax rate for the next five years. At that rate, officials project the average county homeowner would pay the same real-estate taxes for the next two years as under the current 74.2 cents rate, once declining property values are factored in.

See the DP article here.

Related Reading:
Foodstamp Usage Soars in Central VA
Albemarle County School Budget to Be Cut Up to $10
Albemarle County Budget Down Has $5.4 Million

Tuesday, December 1, 2009

Crozet Townhouse - 2006 Buying Price: $267K. 2009 Asking Price: $212K

1120 Edmond Court, in Waylands Grant, behind the Old Trail development in Crozet.

Photo above via/copyright CAAR

PNG below from Albemarle County Records

Related Reading:  Old Trail For Sale

Virginia Borrows $1.26 Billion To Pay Unemployment Claims

Via Mish and originally at Hampton Roads PilotOnline.

The Commonwealth will tap into funds borrowed from the US Treasury, which was arranged in September by outgoing Governor Tim Kaine.  The funds will carry interest payments of about $36.7 Million.  The last time this kind of borrowing was necessary was in 1983.  From the article:

The state's average unemployment tax per employee will jump from $95 this year to $171 in 2010 and to $263 by 2012, the VEC said in a Sept. 29 presentation to the Commission on Unemployment Compensation.

For small retailers, the financial pressure from weak sales and higher unemployment taxes could be intense....[t]he deficit in its unemployment-benefits fund will hit $194 million by the end of this year and balloon to $561 million by the end of 2010, the Virginia Employment Commission said.

Two dozen states, including North Carolina, South Carolina, New York and Texas, have already borrowed about $21 billion from the federal government to pay jobless benefits, according to the Labor Department.

US Food Stamp Usage Soars Since 2007: Central VA Sees Significant Rises

The Sunday New York Times featured a  long article about "food stamps," the current name for which is "SNAP" or Supplemental Nutrition Assistance Program, run by the US Department of Agriculture. The Undersecretary who oversees the program, Kevin Concannon, says 20,000 people are added to the program per day and that 15-16 Million more are eligible.

In the US, one in eight people and one in four children, for a total of 35 million, receive SNAP assistance.

Locally, as elsewhere, usage has soared since 2007:

Albemarle:  +43%
all people 5%, children 10%

Charlottesville: +30% 
all people: 12% children: 28%

Greene County +56%
all people: 8%, children: 14%

Fluvanna County +63%
all people: 5%,  children: 9% 

Nelson County +46% 
all people: 12%, children: 25%

Louisa County +61%
all people: 10%, children: 18%

Madison County  +75%
all people: 8%, children: 16%

City of Waynesboro +48%
all people: 16% children 29%

City of Staunton +32% 
all people: 13%, children: 26%

Food Stamp Use Soars, and Stigma Fades
Interactive Map of Food Stamp Usage Across USA

Monday, November 30, 2009

Christmas Comes Early For UVA Football Program--Especially Al $4.3 Million Groh


Albemarle County School Budget Will Be Cut Up To $10.4 Million

Albemarle County continues slouching toward a mediocre quality of life now and in the future.

The DP article gives the hard truths about the school budget cuts, the County/City $ agreement, and the possibility of a raise in property taxes.  Property values have declined so much that even with a raise in taxes, the County will still experience a budget shortfall.  Read here.

Related Reading:
Albemarle County Budget Down $5.4M

Christmas Canceled in Scottsville As Unemployment Surges; Already Canceled in Waynesboro and on 29 North

The Uniroyal/Hyosung Tire Plant is closing, leaving 106 people jobless.  Scottsville, a town on the James River in southern Albemarle County, has 500+ residents.

Earlier, Christmas was canceled in Waynesboro, with the closing of the Mohawk Plant a week before Christmas.

Christmas will also be cancelled for 68 US Postal workers in Charlottesville, as the sorting facility will be moving to Sandston (near Richmond) to save the federal government money even as it leaves these folks jobless and receiving unemployment benefits.

Related Reading
Current Bureau of Labor Stats for Charlottesville MLS.
Unemployment Doubled in Charlottesville Albemarle in Past Year; 20 yr High
Private Sector Job Growth Ended in 2008

Wednesday, November 25, 2009

Edgar M. Bronfman Lists Albemarle County Estate for $17 Million

Edgar M. Bronfman, the philanthropist and patriarch of the Seagram's family, seeks to sell the 600+ acre Georgtown Farm.  In addition to his business dealings, Bronfman served as president of The World Jewish Congress until 2007.  He is father to Edgar M. Jr, CEO of Warner Music Group;  local chanteuse Lauren Hoffman calls Bronfman "Grandpa."

MLS 471601
636 acres
7850 sq feet, 5 bedrooms, 9 baths
ca. 1975. 
McLean Faulconer has the listing.

See The Hook on tax breaks for "farm use," and mention of the farm.
Photo via/courtesy CAAR. 

Related Reading:
Patricia Kluge Lists Albemarle County Estate for $100M

Sunday, November 22, 2009

Sales and Prices of Single Family Homes in Charlottesville and Albemarle, Year to Date

2009 compared to 2008 sales of detached home.
Click for larger image in new window.

This is from Realtor Jim Duncan at RealCentralVA, and was originally on his Posterous.
Related Reading:
To Buy or Not to Buy, That Is the Question

Robert Shiller Wonders If Recovery Is All In Your Head - And Current Info Indicates It Just Might Be

The co-creator of home-price tracker Case Shiller Index, an economist and Yale professor, says in the NYT, "Beyond fiscal stimulus and government bailouts, the economic recovery that appears under way may be based on little more than self-fulfilling prophecy."

We all want the Great Recession to be over, so we're acting like it is.  But recent data indicates "recovery" is a long, slow way off.
History, and the cycle of recessions since the early 20th Century, expect us to believe in two year downturns.  Shiller says, "....people start to think it’s time for the recession to end. The very thought begins to renew confidence, and some people start spending again — in turn, generating visible signs of recovery."

However, he says, continued vigilance is needed: there is still "nagging doubt" about whether the US is actually in a "recession" or a "depression."  Continued vigilance is needed, he concludes, to prevent the R from becoming the D.

Recent data supports the notion that Virginia, as well as the US, have a long way to go:

The good news is that NGIC/DIA will bring jobs to this area.  Many, however, are already taken. And of 300 employees recently surveyed, less than half said they would relocate.  Meanwhile,

Unemployment increased in 29 states in October...including Virginia. The City faces a "gloomy" economic future.  Are the two back to back bank robberies anything but a response to the bad economy?  More folks are relying on area food banks: a 30% increase in the past year at the Blue Ridge Area Food Bank.  The State is facing a 3.5 Billion budget shortfall.

Nationally, the housing downturn continues:

Bloomberg: Recovery Will Wait Until 2010 or Later
  • New home construction drastically decreased 11% in October
  • mortgage applications were at a 12 year low
  • mortgage delinquencies and foreclosures now impact one in 7 households in the US
Reuters: US mortgage applications at a 12 year low even as rates drop to lowest in 6 months

Business Insider: Perception of home value remains skewed:

Nationwide, when asked about their own home’s value over the past year:
  • • 25% think their home’s value has increased
  • • 26% think their home’s value has stayed the same
  • • 49% think their home’s value has decreased

In reality, 72 percent of U.S. homes lost value over the past year, and 22 percent of homes increased in value.

Business Insider Recap

Zillow's latest press release 

MSNBC: Of mortgages in trouble, 33% are fixed 30 yr mortgages, not "Sub-Prime" or "Alt-A"

Mark Hanson via BI: The Slow moving Train Wreck in Mid-to-High End Housing will take years for values to stop falling and sales to pick up

Mortgage Bankers expect foreclosures to peak in 2011
Moody's says commercial real estate nationwide is off 43% from peak in 2007 
WaPo:  Foreclosure and Delinquency Rates Spike Amid Growing Unemployment

CNBC: Housing Slump to Get Worse Next year, Not Better

The best news this week?  Swine Flu seems to have reached its peak

That Glow on the Horizon? DIA Jobs in Albemarle County

The DP heralds next September's work-force influx of the Defense Intelligence Agency employees at Rivanna Station.  This means spending in the local economy.  But according to a recent survey of 300 employees, only half of whom responded, the relocation rate of current employees is less than 40%.

The good news: there are still jobs available, and there will be a job fair on December 14.

Related Reading:
Private Business Job Growth Ended in Area
Local Unemployment Doubled in Year

Law Professor Says "Homeowners Should Be Walking Away In Droves" From Underwater Mortgages

A law professor is mystified by people who continue paying on "underwater mortgages," where the value of the home is less than what is owed.  And who is most likely to walk away?  20-Somethings.

 Brent T. White is an associate professor of law at the University of Arizona (a state decimated by foreclosures and plummeting property values).  He's written a paper titled "Underwater and Not Walking Away:  Shame, Fear, and the Social Management of the Housing Crisis." 

White's idea and paper have been in the press earlier this year, but it got attention again in the past week with the most current mortgage delinquency numbers:  14.4% of all residential mortgages are delinquent were or in the foreclosure process during Q309, according to the Mortgage Bankers Association.

From WSJ:

“Homeowners should be walking away in droves,” Brent T. White, an associate professor of law at the University of Arizona, wrote in a discussion paper. “The real mystery is not—as media coverage has suggested—why large numbers of homeowners are walking away, but why, given the percentage of underwater mortgages, more homeowners are not.”

White's paper is here.
The post from the WSJ Developments blog is here.
A NYT article about three 20-somethings with little $ who bought a $1M property with an FHA loan, here.  (Not that they'll walk away....)

Monday, November 16, 2009

Charlottesville Albemarle Area Real Estate: To Buy Or Not To Buy, That Is The Question

And if you do decide to buy, how do you decide what to offer?

This post is an aggregate of the local, regional, and national information that is currently available (mid-November 2009) to buyers.  It comes six weeks into the Fourth Quarter of 2009.  It quite possibly tells a buyer (and seller) everything they might need to know ()....And if it doesn't, there will surely be additional material posted in comments.

This post began in response to a query by a reader who says s/he is about to buy, in the comments after a post about the extension of the Homebuyers Tax Credit. 

To recap, the buyer is looking in Western Albemarle County, desiring something close in to the City of C'ville, about 2500 sq ft, 4 bedrooms, 2.5-3 baths.  The buyer has been watching the market and believes purchase prices have dropped 15-20% in the past year, and that there is not much further "flexibility" (ie, declines) coming in that particular area; additionally, rents seem to be holding steady in the area where buyer wants to be. 

Q: So why should the buyer wait?

Answer #1:  The buyer shouldn't wait.  As we noted in the comments, they have compelling reasons to buy: they want to settle, and they want control over their environment.  They seem to have come up with a numbers scenario (downpayment, morgate math) with which they can live.  And if the buyer is going to buy right now in the half million range, they are obviously secure in their employment.  They have saved a large downpayment, in addition to a year's worth of living expenses in the event of illness or job loss.  Additionally, the buyer must have enough financial "cushion" so that if the house drops in value, they can weather the loss of equity.  And part of the "weathering" would come from the fact that they plan to stay put for at least seven years.  (What would make the value drop further?  A rise in foreclosures at that price point due to Option ARM resetting, or a sudden onslaught of those waiting to sell putting their houses on the market, or an increase in name a few).  So if all these elements are in place, sure, why not?  Why not buy? 

Answer #2:  The buyer should wait for several reasons:

A.  Because of what "Crunching Numbers" says in the comments:  To rent will be $1850 per month, while to buy will be $3250 per month.   UPDATE:  but is this math accurate?  See how Crunching Numbers gets to these figures here, and then read the original commenter's disagreement with the numbers in the Comments section following this post.  The  rent versus own numbers are much closer in terms of what the original commenter considers monthly expenses.

B.  Additionally, there are many unknowns in the housing market right now--locally, regionally, nationally.  And if a buyer doesn't negotiate a prescient deal now, there's lots of financial chaos that could ensue.  (For a proposal on how to make an offer on a house, see Salvatore's comment after this post.)  (And if you want yr blood to go cold, read around here.)

It's the knowns, and the unknowns, to which the rest of this post will be devoted--things that would make some buyers wait.   It's these local topics:

1.  Appreciation
2.  Wages v. Home Prices 
3.  Sales
4.  Unemployment
5.  Foreclosures
All leading to 

6.  "Recovery" 

Before getting to the list, however, a few things to keep in mind: 

The "bad news": 

1.  The Federal Housing Administration now has about 40% of the housing market, from about 2% a few years ago.  It now guarantees one in five loans for single family homes, and its cash reserves are below what Congress mandates.  Bailout?  No: Treasury.  In announcing this debacle the other day, Housing and Urban Development Secretary Shaun Donovan  said "We are in an exremely volatile period...We are in uncharted territory." (Read more here.)  
2.  Mortgage rates for 30 yr fixed are below 5%...but mortgage applications are at a nine year low.  
3.  Foreclosure filings were beyond 300,000 for the 8th straight month in October. 
4.  More than 2.4 million homes are expected to be lost to foreclosure in 2010.
5.  Making Home Affordable, the mortgage mod program, has not actually helped 4 million homeowners avoid foreclosure, as per original projections. 
6.  Fannie and Freddie are due for more losses.   That is, the taxpayers are.
7.  National Unemployment is at 10.2%, and a shocking 17.5% when including underemployed individuals, those who have stopped looking, those whose hours and wages have been cut, etc.
8.  Shadow Inventory, estimated at 7 Million Homes.  Mortgage guru Howard Glaser, via Realty Check:

What I am most worried about is March and April of next year.  What happens to a housing market that seems like it is finding its footing at that point?  Because several things will happen simultaneously:  You've got the option ARM resets beginning to kick in, you have the home buyer tax credit expiring, maybe for  real that time, and you have the Federal Reserve maybe running out of money to buy mortgage-backed securities. If we add on top of that, banks beginning to release some of this inventory ,which they have been holding on to for a long time, those three items are potentially very destabilizing to the  marketplace.   So I'm concerned.  I think buckle your seatbelts for Spring of next year.

9.  Housing in VA won't regain its values until 2023.

The "Good News": 

1.  The Homebuyer Tax Credit has been extended/expanded, and is in place until April 30, 2010. 
2.  The Federal Reserve has extended its purchase of Mortgage-Backed Securities through March, 2010, which should effectively keep mortgage rates around 5%. 

Now, to the list.  Everything that comes below tells the Buyer one thing:  The Asking Price is a starting point.  And usually a high starting point.  The Offer needs to take all of the following info into consideration.  Starting at 10% below asking, and making further deductions--and as frequent commenter Downtownenvy says, The best tool for negotiating in this market is your feet.


Area Appreciation
Anybody who has lived in the area for more than a couple of years has seen housing prices, and asking prices, skyrocket; only recently have both begun falling.  The real data?

The Federal Housing Finance Administration (FHFA, formerly the OFHEO, Office of Federal Housing Enterprise Oversight), compiles data on pricing in a purchase-only, seasonally adjusted index.  For existing single family (detached) homes in the Charlottesville Metropolitan Statistical area (Cville, Albemarle, Greene, Fluvanna, Nelson):

Five year appreciation: 2005-2009 Q2: 33.70%.  The Rank is 168 of 296,  -3.58  for 1 year,  -2.56 for the quarter. This is the "slow down."  See pdf.  But the bigger jumps come earlier.  Data to 2007 shows: 

The 10 year appreciation ending in 2007 in the Charlottesville MSA was 135%.  Charlottesville ranked 64th.  See here.  Note that for the 10 year appreciation, most of the states ranked higher than Cville are all "Big Bubble" states--California, Florida, Arizona, New York, Maryland/DC. 

The five year appreciation (2003-2007) in the Charlottesville Area was 69.22%.  Charlottesville ranked 74th.  See here.

For FHFA  quarterly percentage increases, go here.  Maps of Metropolitan Statistical Areas here. 

The logical responses to these numbers are HUH?  and WHY?  Bubble, and "protected market."  To put the bubble years in context, let's look at 


Throughout the recorded history of home sales, which is about a Century, property appreciation has been startlingly consistent, averaging about 1% per year, plus 1-2% for inflation.  In Bubble periods, it's a whole other ball'o'wax...until it isn't.

Click for larger image in new window 

The chart in its original is here; the updated version (above) is from The Big Picture.


As in many areas, wages and home prices got detached from each other during the bubble.  This was possible due to "liar loans"--no necessity to state an actual income, or to prove it, as well as Option ARM loans, a loan that would start low and eventually reset to a higher rate.  According to the Thomas Jefferson Partnership for Economic Development, in a recent presentation to the Charlottesville Area Association of Realtors, 

The average wage in the Greater Charlottesville Area is $42,588:
Click for larger image in new window 

Historically, the prudent buyer would spend no more than 2.5x annual wages on a home.  The Charlottesville MSA is one of the most expensive areas of the state, where buyers have spent nearly 6x income for a house.  The following graph is from the Virginia Housing Development Authority
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The orange bar is where we are now.  

Median and Average Prices for Sold Single Family Homes in the Charlottesville MSA:
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According to the VHDA,
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Red line = Cville.  Earned wages and housing prices don't have a realistic relation to each other in this market. 

3.  SALES 

Is it any wonder that with the fairly low median wages combined with high appreciation and the end of "easy" mortgage products,  area sales are at a decade low? 

The graph below is from August 2009; in September and October there were stronger sales than seasonally expected, as the $8k homebuyer tax cred was slated to expire November 30. 

"May be near bottom," as the graphic says, is hopeful speculation on the part of the VHDA.  Sales have picked up in other parts of Virginia due to mass foreclosures which caused rapidly falling prices and made housing more "affordable" than during bubble years.

Click for larger image in new window

Another graph, this time for all of Central Virginia, through the end of 3rd Quarter 2009, September 30.  Data from CAAR, graph from a reader.
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When things do sell, they're at the lower price point. As an example, 69% of all single family (detached) home sales in the City of Cville this year have been under $350K:

Via Nest Realty.

There's been a significant lack of move-up buyers, and higher-priced homes are selling very slowly.  "Higher priced" as in above $500K; and above $1M in this area?  Fuggedaboutit.

TOTAL SALES through the 3rd Quarter in 2009 as compared to 2008, via Nest Realty Group.  The Group decided to include Louisa in these stats, hence the "E" for extended.  (Louisa is not part of the Metropolitan Statistical Area.)
Click for larger image in new window

Lastly, the Charlottesville Area Association of Realtors publication of total sales numbers for the 3rd Quarter in 2009 and previous years.  "Total sales" include single family detached houses, townhouses, condominiums.  Again, notice that areas outside of the Metropolitan Statistical Area are included: Louisa County, Orange County, Greater Augusta (Augusta County, Cities of Waynesboro and Staunton):

Albemarle County sales down 50% from 2005 peak
Charlottesville sales down 48% from 2006 peak
Fluvanna sales down 63% from 2005 peak
Greene sales down 45% from 2005 peak
Louisa sales down 36% from 2005 peak
Nelson sales down 71% from 2005 peak
Orange sales down 55% from 2005 peak

Click for larger image in new window


THIS is the quarter million dollar (half million dollar, million dollar) question, isn't it?


Local Unemployment has doubled in the past year.  It is currently at a 20 year high.  UVA has a wage and hiring freeze.   The troubles are not necessarily over.  Private business growth has ended, and jobs are declining. 

And evidence of this is everywhere you look, in the form of commercial real estate signs "For Sale," and "For Lease."

NGIC and DIA are bringing jobs to the area--but they're already spoken for.  In the future, the employees may require goods and services that create new jobs: but this growth will be slow, over the next few quarters/years.    

The latest round of cuts?  Postal Employees face the axe.


Add the following foreclosures numbers for the Charlottesville Area, and the result is 676.  The total sales for same period YTD for the Cville MSA are 1559...676 is 43% of 1559....

So nearly half of what was sold was replaced by something that will once again come on the market...and at a lower price. 

Add this to the inventory from sellers who are "waiting out the market" to list?  Buyer's market continues....

And there will be trouble from Alt-A loans:

The VHDA presentation opens with the following slide, but we'll close with it:

But what does "recovery" mean?  A return to pre-bubble prices?  A drop in asking prices?  A return to the historic metric of price-to-2.5xwage ratio?  Sales levels that don't keep declining?  A halt in foreclosures?  A point of view that understands that a house is not an "investment" primarily, not a profit machine or an ATM or HELOC, but a place of comfort for an individual or family? 

Related Reading
Virginia Housing Development Authority Forecast Link  
Lack of Move-Up Buyers in Charlottesville/Albemarle
Median Prices Charlottesville Albemarle Area 2001-2009 
Higher Priced Homes Sell At Snail's Pace
 Graphs Showing Declining Sales 2003-2009

Friday, November 13, 2009

Friday the 13th: FHA, Foreclosures, Fannie, Freddie...and Declining Mortgage Applications

The Federal Housing Administration is in deep trouble. The agency insures loans made by private lenders, and a recent audit showed the capital reserves were o.53%, much below the 2% mandated by Congress last year. 

[T]he agency insured too many loans to unqualified borrowers in 2007 and 2008, a position the agency itself now agrees with. Nearly one in five loans it insured in 2007 now fall into the category of “seriously delinquent,” it revealed Tuesday.

Note that these loans were made years after Bubble Peak, primarily to those with low(er) credit scores who couldn't come up with more than 3-3.5% down payments.

HUD Secretary Shaun Donovan has no worries.  CalculatedRisk wonders about mortgageholders who aren't ready for homeownership.

US Foreclosure Filings topped the 300,000 level for the 8th straight in every 335 houses received some kind of late or default or auction notice, up 19% from a year ago, according to RealtyTrac.  Read more.

More than 2.4 MILLION homes are expected to be lost to foreclosure in 2010, a conservative estimate.  Add this to the over 7 MILLION homes comprising the "shadow inventory" that are not yet on the open market?  Home values will be driven lower, and the cycle will continue.   While lower prices/values would be good for areas such as Charlottesville Albemarle which haven't finished "correcting" to historic metrics, in other areas falling values will continue a vicious cycle. The NYT urges the Obama Admin to do more with Making Home Affordable, the mod program.

Fannie and Freddie Warn There Will Be More Losses due to the weakening condition of mortgage-insurance companies:

Fannie and Freddie together have required capital injections from the Treasury of $112 billion since the government took them over through conservatorship last year.... Fannie and Freddie have received payouts of $2.3 billion and $658 million, respectively, from mortgage insurers through September this year....But as conditions for mortgage insurers deteriorate, Fannie and Freddie have warned that their claims against the insurers may not be paid in full. 

More here.

Mortgage Applications, for both new purchases and re-fi's, were at a nine-year low last week, despite rates beneath 5%.  Read here.

Thursday, November 12, 2009

Charlottesville City Revenue Projected To Be Down $2M in Fiscal Year 2010

But Fiscal Year 2009, which closed June 30, ended with a surplus.  You wouldn't know the important elements of the City's  2010 revenue projection, however, which come from declining sales, meals, lodging, personal, and property taxes, unless you read the very last line of The DP's article on the subject. 

Related Reading:
Charlottesville Albemarle Commercial RE Continues to Struggle
Albemarle County Faces $5.7M Budget Deficit

Monday, November 9, 2009

Charlottesville Albemarle Commercial Real Estate: Many Vacancies Plus Businesses Still Closing. But Hey, Could Be Worse!

Stores and restaurants are still closing in this area--most recently, think "Nature's Child" Downtown as well as 29N, and Wild Greens in the North Wing of Barracks Road.  The strip mall that includes Whole Foods, Shopper's World on 29N, has a slew of empty storefronts, and the ex-Circuit City building in Albemarle Square is still empty--just "waiting" for the "right" tenant a year later.   

Whole swaths of the Downtown Mall are deserted, and the ugly exoskeleton of the Landmark Hotel is an exclamation point on the emptiness.  New retail and business construction has ground to a halt, except in the case of Wendell Wood and Wal-Mart's expansion. 

But the important thing to remember, according to an article in today's DP, is that things could be lots worse When compared to Richmond, a metropolitan area many times the size of Cville, we're doing just fine.

Read the good news spin here.  

Related Reading:
Nationwide Commercial RE: "Gloomy Times"   
Albemarle County Basing Budget on Fanciful Future RE Tax Revenues
Area Commercial Real Estate Spring 2009
Local/National Unemployment Latest Figures

Saturday, November 7, 2009

Ponzi Schemer John M. Donnelly Sentenced To 7+ Years, $5.3 Million Restitution

Confessed Ponzi schemer John M. Donnelly was sentenced on November 6 to 7 1/2 years in Federal prison and ordered to pay restitution of more than $5.3 Million.  He is currently being monitored by GPS, out on $100K bond, and must report to prison in six weeks.

During sentencing, one victim noted Donnelly lived a luxurious lifestyle. Donnelly's house is a 5 bedroom, 4.5 bath, 3,000 sq. ft. house on 3.4 acres on Church Plains Road in Crozet's Church Hill subdivision.  The house was purchased in 2003 for $440K; it is currently assessed for $597,700 (pictured, to left, from County records).

Wife Deborah Donnelly is the Executive Director of UVA's Curry School of Education Foundation, which is responsible for garnering charitable donations.  The house, which is titled jointly in both names, was purchased after the alleged Ponzi scheme began.  While Deborah Donnelly was initially named a "relief defendant," she has not been charged with any wrongdoing.

Additional assets include a Hummer, 64 acres in Fluvanna, and multiple motorcycles—all of which have or will be liquidated to help repay victims, according to Courteney Stuart for The Hook.

The judge was excoriating during sentence.  Again, from The Hook:

Judge Norman K. Moon expressed disgust for the crime that bilked 30 of John M. Donnelly’s friends and motorcycle racing teammates of more than $5 million.
“This defendant knew these victims were making life decisions,” said Moon, who referred to Donnelly as “evil” at one point and scoffed when defense attorney John Davidson suggested Donnelly was sorry for the pain he’d caused
“If they hadn’t caught you, you’d be doing it still today,” he said.

Related Reading: 
The DP's coverage of sentencing

Wife, UVA Fundraiser Deborah Donelly, Charged as "Relief Defendant" 
Madoff Lite: Feds Claim Charlottesville Ponzi Scheme by Lindsey Barnes, The Hook
SEC Press Release
SEC Complaint Against John M. Donnelly
US Commodities Futures Trading Commission Press Release
SEC Press Releases

Friday, November 6, 2009

Nat'l Unemployment At 10.2%, But Unemployment Benefits and Homebuyer Tax Cred Extended/Expanded and Fannie Mae Starts Deed For Lease Program

Big day in bailouts for the common man.

America is out of money.  It's time to fire Timothy Geithner.   Too bad all of the taxpayer funds that went to bailing out the Too Big To Fail banks and firms didn't go directly to the American people; would have made for a happier, if not better, nation.

The national rate of 10.2%, plus the "real" rate of 17.5% unemployment, highest ever, which includes those who have stopped looking or are underemployed in hours or salary, will continue to impact every state until it is resolved.

The Commonwealth is faring a little bit better than other states.

Our area has a 20-year high in unemployment: In the Charlottesville MSA (Metropolitan statistical Area, which includes the City plus Albemarle, Nelson, Greene, and Fluvanna) the most recent unemployment data shows 6.4% for the MSA, 7% for the City, and 5.3% for the County.  

A  commenter on this post sent the following links, showing that Va's unemployment scenario in the Southside has improved in the past six months: a smaller area of widespread 10-15% unemployment to widespread 8-10% & 6-8% unemployment. 

Related Reading:

DP on State Unemployment
BLS, Va Economy at a Glance
Current Unemployment in Cville Area
DP on Extending Tax Crud
Cville Move-Up Market and Tax Crud

Some pictorial representations of unemployment during this recession compared to others.  Click for larger image in new window.

From CalculatedRisk

From The Big Picture: